Realty woes: Home sales fell by 42% in Delhi-NCR in the first eight months of 2012

Dipping home sales, lack of fresh launches, high property rates and controversy over land deals-it may not be the brightest of Diwali for the realty sector this year.

However, with interest rates coming down, property rates showing signs of stability and a go ahead from the Greater Noida authorities, developers believe that a turnaround in fortunes for the real estate market is not far away." There was a trust deficit in the market, due to one controversy after another," said Lalit Kumar Jain, president, The Confederation of Real Estate Developers' Association of India (CREDAI).

"We are working to bring the trust back through self regulation and transparency," he said. "The festive season is the best time to restore the confidence of the buyers," he added. Market analysts cite the period from Dussehra to Diwali as the most auspicious for buying property. The volume of real estate transactions as a rule shoots by 25 to 35 per cent during this period. However, it was a dull season for the realty sector this year with weak demand from the buyers. Yet optimism runs high as many believe that the market will pick up in the coming months.

"This was not a great year for the realty sector. But sales are happening and the market will improve in the days ahead," predicts Anil Sharma, Chief Managing Director Amrapali.

According to Real Capital Analytics, the quantum of institutional transactions during 2012 in the real estate sector was estimated at Rs 97,430 crore. A majority of the transactions occurred in the commercial segment. The commercial office sector netted the highest share at Rs 54,700 crore followed by the residential sector at Rs27,500 crore during the first three quarters of 2012.

In a welcome move, the Reserve Bank of India indicated a downward correction in interest rates recently. "We expect a further softening of interest rates and if that happens, then the demand will be back," said Sharma. "There is still a huge demand for affordable and mid segment housing," he said.

"Even now projects which are rightly priced are selling well. So once the interest rates are docked buyers will return to the market," Sharma said.

According to PropEquity, a real estate data analytics and research firm, housing sales fell by 42 per cent in the national capital region during the first eight months of 2012 compared to the same period last year.

The new launches also took place at a slackened pace during these eight months.

PropEquity, attributed the fall in housing sales to the lack of demand from investors owing to uncertain economic situation in the country. The investors too stayed away from business awaiting the onset of more favourable times.

However, despite a hands off approach from the part of the investors, market for end users have remained robust, said Gaurav Pandey, Senior Vice President and Head - Research and Consulting, PropEquity.

"Though a major impact of the economic uncertainty was felt by the market, the uncertainty did not affect the end- user driven markets badly," Pandey said.

Home sales fell by 42% in Delhi-NCR in the first eight months of 2012 compared to the previous year.

'Investment slump has hit real estate business'The first three quarters of 2012 witnessed a fall in the quantum of private equity investments in the real estate sector in the country.

The private equity investments is recorded at ` 35 billion which is approximately 15 per cent lower than the same period last year. The total number of private equity transactions till date in 2012 is 23, marginally lower when compared to same period last year.

Of the total investment in first three quarters of 2012, the first quarter saw majority of the investments at Rs 21 billion while the remaining two quarters recorded Rs 13.8 billion. While the second and third quarters depict a drop in investment volumes, the real estate sector continues to attract steady investments during the year.

The Indian real estate sector has seen a drop of 15 per cent in Private equity investments in the first three quarters of the calendar year 2012 compared to a year ago. The reason for the fall in number of deals was mainly due to a lot of concerns on the government policy front coupled with an uncertain investment scenario, valuation and continued focus on exits for vintage funds.

Income yielding office continues to interest and attract investors. Most of the deals executed in 2012 were through Special Purpose Vehicles ( SPV) in contrast to the previous year when investments were witnessed through both entity and SPV levels, as they provide greater transparency and accountability along with ease of exit.

The residential segment witnessed maximum private equity investments at Rs 20.6 billion during the first three quarters of 2012. The share of residential deals in the total private equity investments increased by nine per cent in first three quarters of 2012 over the previous year, although the quantum of investments have been similar during the two periods.

The office segment also continued to attract investment with a higher number of deals compared to the previous last year.

However, it saw a decline in investment volume by 12 per cent during the first three quarters of 2012 compared to the same period last year due to lower average deal size.